Businesses caught off guard by post-Brexit volatility – research

The institute found 69% of businesses were primarily worried about market movements, followed by regulatory change (56%) and a dip in consumer and business confidence (47%).

The organisation had interviewed 220 heads of internal audit in firms across all sectors in July.

So far, since the EU referendum on 23 June, currency markets have been affected by the decision to leave with the value of the pound falling against both the euro and the dollar.

Commercial property funds have also suffered, many having to suspend trading in early June after investors sought to pull out their funds. However, UK equities performed well as a result

Business confidence waned following the vote, according to some surveys, with the Institute of Chartered Accountants in England and Wales (ICAEW) reporting an 11 point slump in its latest barometer. Despite this, businesses have shown to be resilient, with confidence levels expected to be rising once they have taken stock of the situation, ICAEW said.

The auditor’s institute found the majority of audit teams (61%) had not considered Brexit as a factor in their annual audit plans, believing it would not happen. In contrast, following the vote, about 91% of firms had started to make contingency plans.

Most organisations or 85% told the institute they felt they would be affected by the leave vote. Despite that, a mere 42% of firms asked their internal audit teams to evaluate how risks to their contingency plans were being managed.

The organisation said this could be because annual audit plans are already in place or because organisations’ own plans are not sufficiently advanced for internal auditors to be providing assurance on them.

Chief professional practice adviser Liz Sandwich said: “The number of internal auditors currently providing assurance is below my expectations, given that boards should be seeking assurance on the different dimensions of risk facing their organisations, such as exchange rate volatility.

“Activity levels will be higher where organisations use a risk-based approach to internal auditing, deploying internal audit resources flexibly to agreed areas of greatest risk at any one time, rather than carrying out audits on a cyclical basis.”